Research Areas
Capital Gains & Dividends Taxes
The taxation of dividends and capital gains is one of the most controversial issues in public finance. Relatively high effective tax rates on capital income, particularly that emanating from the corporate sector, have the potential to discourage investment and impede economic growth. Corporations must pay corporate income taxes on profits before they distribute dividends to shareholders, and shareholders pay an additional, individual-level tax on those amounts. Imposing two layers of taxation on corporate income can result in a total tax rate on capital income from corporations that is substantially higher than the rate on other types of income. In recent years, policymakers have become concerned about the economic damage caused by relatively high effective tax rates on capital income, and in 2003 the tax rate on capital gains and dividend income was lowered to 15 percent.
Additional questions about capital gains and dividends taxes? Contact Bill Ahern at (202) 464-5101.
Articles from the Tax Foundation
- Jim Tisch and Ed McClellan on Corporate Capital Gains, March 31, 2008
- Federal Capital Gains Tax Rates, 1990-2008, January 7, 2008
- Dividends and Capital Gains Income Compared to Other Income by State, 2005, July 16, 2007
- As Presidential Candidates Target Investment Income for Higher Taxes, Which States Stand to Lose the Most?, by Gerald Prante, July 16, 2007
- Federal Capital Gains Tax Collections, 1954-2004, May 31, 2007
- Federal Individual Income Tax: Exemptions and Treatment of Dividends, 1913-2006, December 12, 2006
- Mihir Desai on Corporate Taxation, Business Decisions and Territoriality, December 5, 2006
- Issues in the Indexation of Capital Gains, by Curtis S. Dubay, November 22, 2006
- Double-Taxing Capital Income: How Bad Is the Problem?, by Patrick Fleenor, November 16, 2006
- Douglas Shackelford on the Future of the Corporate Income Tax and the Effect of Taxes on the Stock Market, November 7, 2006
- Majority of Taxpayers Affected by AMT Also Claim Capital Gains or Dividend Income, by Gerald Prante, February 26, 2006
- The Importance of Dividend Income for Low-Income Seniors, by Gerald Prante, February 8, 2006
- Reliance on Capital Gains and Dividend Income Tends to Rise with Age, by Scott A. Hodge, December 14, 2005
- Majority of Seniors Benefit from Reduced Capital Gains and Dividend Tax Rates, by Scott A. Hodge, December 6, 2005
- Taxable Dividends Vary Dramatically by State, by Scott A. Hodge, January 16, 2003
- Putting a Face on Dividend Earning Taxpayers, by Scott A. Hodge, January 6, 2003
- Bottom Line on the Taxpayer Relief Act of 1997, by Patrick Fleenor, September 1, 1997
- Issues in the Indexation of Capital Gains, by Arthur P. Hall, Ph.D., April 1, 1995
- 50 Years of the Federal Capital Gains Tax Burden, by Arthur P. Hall, Ph.D., March 1, 1995
- Capital Gains Taxation and Small Business House Small Business Committee Testimony, by J. D. Foster, Ph.D., March 1, 1995
- The Contract with America and Tax Reform, by J. D. Foster, Ph.D., January 11, 1995
- Tax Review: Adjusting Tax Rules for Inflation: Capital Gains and Capital Income, by Martin S. Feldstein, January 1, 1979
- Tax Review: Taxing Capital Gains, by Norriss Darrell, August 1, 1973
- Tax Review: Capital Gains, Losses in Income Taxation, by Dan Throop Smith, December 1, 1972
- Links to Other Tax Policy Resources, January 1, 1937